Question 1

Both the direct method and the indirect method of computing net cash flow from operating activities convert accrual-based income statement amounts into cash flows.

Accepted Answer

A) True 
 B)False

Question 2

At the end of the first year of operations,Meacham's balance sheet showed the following account balances: Accounts Receivable,$13,400; Inventory,$9,400; and Accounts Payable,$14,650.The company's income statement reports net income of $37,400,including depreciation expense of $10,400.Using only the given information,compute Meacham's net cash flow from operating activities using the indirect method.

Accepted Answer

A) $65,250. 
B) $39,650. 
C) $24,350. 
D) $26,650. 
A) $65,250. 
B) $39,650. 
C) $24,350. 
D) $26,650.

Question 3

At the beginning of 2015,Baldwin Corporation bought an automobile for $36,000 by issuing a note payable.The automobile has a six-year life and is depreciated using the straight-line method.To determine net cash flow from operating activities for 2015 using the indirect method,net income should be:

Accepted Answer

A) Increased by $6,000. 
B) Decreased by $6,000. 
C) Increased by $42,000. 
D) Neither increased nor decreased.No adjustments are necessary since no cash was received or paiD.$36,000/6 = $6,000 
A) Increased by $6,000. 
B) Decreased by $6,000. 
C) Increased by $42,000. 
D) Neither increased nor decreased.No adjustments are necessary since no cash was received or paiD.$36,000/6 = $6,000

Question 4

Bert's Bungy Jumping,Inc.paid $650,000 cash for casualty insurance during the year 2015.If the income statement for the year reports insurance expense of $620,000 then:

Accepted Answer

A) Bert's prepaid insurance decreased $30,000. 
B) Bert's cash account balance decreased $30,000. 
C) Bert's prepaid insurance increased $30,000. 
D) Bert's prepaid insurance was $30,000 at year-end. 
A) Bert's prepaid insurance decreased $30,000. 
B) Bert's cash account balance decreased $30,000. 
C) Bert's prepaid insurance increased $30,000. 
D) Bert's prepaid insurance was $30,000 at year-end.

Question 5

When net cash flow from operating activities is presented by the direct method,the statement of cash flows is accompanied by a supplementary schedule reconciling:

Accepted Answer

A) Net cash flow from operating activities with net sales. 
B) Net income with the net increase or decrease in cash and cash equivalents. 
C) Net income with net cash flow from operating activities. 
D) Net cash flow from operating activities shown in the statement with that which would result from use of the indirect method. 
A) Net cash flow from operating activities with net sales. 
B) Net income with the net increase or decrease in cash and cash equivalents. 
C) Net income with net cash flow from operating activities. 
D) Net cash flow from operating activities shown in the statement with that which would result from use of the indirect method.

Question 6

When using the indirect method,depreciation expense:

Accepted Answer

A) Increases net cash flow from operations. 
B) Decreases net cash flow from operations. 
C) Does not affect net income. 
D) Does not affect net cash flow from operations. 
A) Increases net cash flow from operations. 
B) Decreases net cash flow from operations. 
C) Does not affect net income. 
D) Does not affect net cash flow from operations.

Question 7

The accountant for Foster Institute,Inc.,determined the cash flow for several transactions to be as follows:   On the basis of the above transactions alone,determine the net cash flow from financing activities.

Accepted Answer

A) $275,000 net cash used for financing activities. 
B) $440,000 net cash provided by financing activities. 
C) Zero: cash inflows equal cash outflows from financing activities. 
D) $285,000 net cash provided by financing activities. 
A) $275,000 net cash used for financing activities. 
B) $440,000 net cash provided by financing activities. 
C) Zero: cash inflows equal cash outflows from financing activities. 
D) $285,000 net cash provided by financing activities.

Question 8

When credit sales exceed collections of cash from accounts receivable,the increase in accounts receivable is added to net sales to determine the amount of cash collected from customers during the period.

Accepted Answer

A) True 
 B)False

Question 9

Cash flow from operations activities-indirect method
An analysis of the 2015 financial statements of Portside Provisions reveals the following:
(a)Accounts payable to suppliers of merchandise decreased by $65,000 during 2015.
(b)Dividends of $135,000 were declared in November 2015,to be paid in January 2016.
(c)Dividends of $120,000,declared in November 2014,were paid in January 2015.
(d)Inventory levels increased by $91,000 during 2015.
(e)Depreciation expense for 2015 amounted to $53,000.
(f)Land,which had a cost of $350,000,was sold in 2015 for $400,000 cash,resulting in a gain of $50,000.
(g)Net income for 2015 was $745,000.
Using only the above information,follow the indirect method to compute Portside Provisions' net cash flows from operating activities for 2015.

Accepted Answer

The answer of Cash flow from operations activities-indirect method
An analysis...

Question 10

Early in 2015,Larsen Corporation purchased marketable securities at a cost of $90,000.In September,dividends of $6,600 were received; Larsen sold the securities in December at a gain of $5,600.How would these transactions be reported on Larsen's statement of cash flows for 2015?

Accepted Answer

A) $95,600 net cash provided by investing activities; $6,600 included in cash provided by operating activities. 
B) $12,200 net cash provided by investing activities. 
C) $95,600 cash provided by investing activities; $90,000 cash used in financing activities. 
D) $84,400 net cash used in investing activities; $95,600 cash provided by investing activities. 
A) $95,600 net cash provided by investing activities; $6,600 included in cash provided by operating activities. 
B) $12,200 net cash provided by investing activities. 
C) $95,600 cash provided by investing activities; $90,000 cash used in financing activities. 
D) $84,400 net cash used in investing activities; $95,600 cash provided by investing activities.

Question 11

When applying the direct method in a statement of cash flows,the amount of depreciation is added to net income.

Accepted Answer

A) True 
 B)False

Question 12

In a statement of cash flows,payments of dividends are classified as:

Accepted Answer

A) Operating activities. 
B) Financing activities. 
C) Investing activities. 
D) Costs and Expenses. 
A) Operating activities. 
B) Financing activities. 
C) Investing activities. 
D) Costs and Expenses.

Question 13

Which statement is true as to the FASB's position on the presentation of the statement of cash flows?

Accepted Answer

A) The FASB recommends the use of the indirect method,but most companies use the direct method. 
B) The FASB recommends the use of the direct method,but most companies use the indirect method. 
C) The FASB recommends the use of the direct method,and most companies use the direct method. 
D) The FASB recommends the use of the indirect method,and most companies use the indirect method. 
A) The FASB recommends the use of the indirect method,but most companies use the direct method. 
B) The FASB recommends the use of the direct method,but most companies use the indirect method. 
C) The FASB recommends the use of the direct method,and most companies use the direct method. 
D) The FASB recommends the use of the indirect method,and most companies use the indirect method.

Question 14

The purchase or sale of marketable securities is reported in the statement of cash flows as a financing activity.

Accepted Answer

A) True 
 B)False

Question 15

All of the following are financing activities except:

Accepted Answer

A) Borrowing money. 
B) Lending money. 
C) Selling capital stock. 
D) Paying dividends. 
A) Borrowing money. 
B) Lending money. 
C) Selling capital stock. 
D) Paying dividends.

Question 16

Under the indirect method,depreciation,increase in inventories,and "non-operating" losses are added to net income to arrive at net cash flow from operating activities.

Accepted Answer

A) True 
 B)False

Question 17

The Nelson Corporation reported net income in excess of its net cash flow from operating activities for the current year.An explanation for this may be:

Accepted Answer

A) A loss on the sale of equipment in the current year. 
B) An increase in accounts payable during the year. 
C) Depreciation expense recognized for the year. 
D) A gain on the sale of investments during the year. 
A) A loss on the sale of equipment in the current year. 
B) An increase in accounts payable during the year. 
C) Depreciation expense recognized for the year. 
D) A gain on the sale of investments during the year.

Question 18

Cash flows from operating activities-indirect method
The data below are taken from the financial statements of the Rutherford Corporation:   Complete the partial statement of cash flows for the year ended December 31,2015,showing the computation of net cash flows from operating activities by the indirect method:

Accepted Answer

The answer of Cash flows from operating activities-indirect method
The data...

Question 19

If cash increased during the year and there was also a net loss for the year,there must be positive cash flows from financing and investing activities.

Accepted Answer

A) True 
 B)False

Question 20

The comparative balance sheets of Greenvale Games,Inc.show a net decrease in unexpired insurance of $400 and a net decrease in interest payable of $250.In order to reconcile net income with net cash flow from operating activities,net income should be:

Accepted Answer

A) Increased by $650. 
B) Reduced by $650. 
C) Increased by $150. 
D) Reduced by $150. 
A) Increased by $650. 
B) Reduced by $650. 
C) Increased by $150. 
D) Reduced by $150.

Exam 13: Statement of Cash Flows

Both the direct method and the indirect method of computing net cash flow from operating activities convert accrual-based income statement amounts into cash flows.

At the beginning of 2015,Baldwin Corporation bought an automobile for $36,000 by issuing a note payable.The automobile has a six-year life and is depreciated using the straight-line method.To determine net cash flow from operating activities for 2015 using the indirect method,net income should be:

Bert's Bungy Jumping,Inc.paid $650,000 cash for casualty insurance during the year 2015.If the income statement for the year reports insurance expense of $620,000 then:

When net cash flow from operating activities is presented by the direct method,the statement of cash flows is accompanied by a supplementary schedule reconciling:

When using the indirect method,depreciation expense:

The accountant for Foster Institute,Inc.,determined the cash flow for several transactions to be as follows: On the basis of the above transactions alone,determine the net cash flow from financing activities.

When credit sales exceed collections of cash from accounts receivable,the increase in accounts receivable is added to net sales to determine the amount of cash collected from customers during the period.

Early in 2015,Larsen Corporation purchased marketable securities at a cost of $90,000.In September,dividends of $6,600 were received; Larsen sold the securities in December at a gain of $5,600.How would these transactions be reported on Larsen's statement of cash flows for 2015?

When applying the direct method in a statement of cash flows,the amount of depreciation is added to net income.

In a statement of cash flows,payments of dividends are classified as:

Which statement is true as to the FASB's position on the presentation of the statement of cash flows?

The purchase or sale of marketable securities is reported in the statement of cash flows as a financing activity.

All of the following are financing activities except:

Under the indirect method,depreciation,increase in inventories,and "non-operating" losses are added to net income to arrive at net cash flow from operating activities.

The Nelson Corporation reported net income in excess of its net cash flow from operating activities for the current year.An explanation for this may be:

If cash increased during the year and there was also a net loss for the year,there must be positive cash flows from financing and investing activities.

The comparative balance sheets of Greenvale Games,Inc.show a net decrease in unexpired insurance of $400 and a net decrease in interest payable of $250.In order to reconcile net income with net cash flow from operating activities,net income should be:

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Financial Statement Analysis

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